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CPA Tax Preparer in Wilmington NC Discusses an IRS Motivation Tactic

By Gary Bode CPA, on September 4th, 2010

While the IRS is not a tax preparer, sometimes it motivates folks to find a tax preparer

IRS Notices. I’ll tell a client’s story which demonstrates how the IRS will push a tax payer to provide an original or amended tax return, instead of paying the amounts calculated on the Notice. Even when proper tax preparation reduces the tax due !

True Story, as I heard it, as an Example

The IRS sent my (new) client a Notice in 2010 stating his/her 2007 taxes were being increased by $4148. Why? A Form 1099-C was sent to the IRS, from a local Wilmington NC bank, documenting a cancelled car loan. Which wasn’t listed on the oroginal 2007, self prepared, tax return. Cancelled debt can become taxable income. Frantic, the client called the IRS three times. All three agents noted the tax payer had prepared the return himself and omitted legitimate deductions. All three agents suggested not paying the amount on the notice and finding a CPA tax preparer to file an amended return. One agent told him to find a tax preparer who would ask for the penalties to be abated on the basis he hadn’t received the 1099-C, because the original return had used all other known documentation.

“The IRS is highly cooperative about sharing information they have with the taxpayer to expedite filing a back or amended tax return. But they are not tax preparers.”Gary Bode, CPA | Wilmington NC Tax Preparer and Accountant

On IRS Notices, additional tax is calculated without regard to deductions and credits. This usually results in a scenario where the highest possible amount of tax is due, compounded by penalties and interest. To me, this seems like a negotiating tactic to motivate taxpayers to find a CPA tax preparer who will file or amend a return using all the available deductions and credits. Which means the tax due is less, which lowers the interest component too.

I think the horror stories about the IRS originate from the emotional response a tax payer has to any IRS situation. To me this situation is analgous to a legal case, in which the lawyer proceeds with emotional detachment. A CPA tax preparer can:

Represent you before the IRS.

Concentrate on the actual issues at hand.

Minimize damages to the least legal amount.

Look at how any remaining tax can be paid (IE Installment Agreements, Offers in Compromise).

Alleviate the emotional baggage associated with IRS interaction.

If you need a free initial consult on tax preparation, or any accounting, tax or business issue, please call us at (910) 399-2705.

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